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Bulldogs Inc. loaned a certain amount from a reputable bank for a term of one year at 8% quoted rate for a principal of P415,000. Out of the face value of the loan, only P375,000 can be used due to the provision of a compensating balance. What is the effective rate of interest and the compensating balance? A. 8%; 33,200 B. 8%; 40,000 C. 8.55%; 33,200 D. 8.85%; 40,000

Bulldogs Inc. loaned a certain amount from a reputable bank for a term of one year at 8% quoted rate for a principal of P415,000. Out of the face value of the loan, only P375,000 can be used due to the provision of a compensating balance. What is the effective rate of interest and the compensating balance? A. 8%; 33,200 B. 8%; 40,000 C. 8.55%; 33,200 D. 8.85%; 40,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bulldogs Inc. loaned a certain amount from a reputable bank for a term of one year at 8% quoted rate for a principal of P415,000. Out of the face value of the loan, only P375,000 can be used due to the provision of a compensating balance. What is the effective rate of interest and the compensating balance?

A. 8%; 33,200
B. 8%; 40,000
C. 8.55%; 33,200
D. 8.85%; 40,000
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